Oct 23, 2012

Higher costs forcing firms to relocate (from China)

Rising wages and shrinking export demand are forcing manufacturers to relocate to neighboring Southeast Asian nations and many that remain are seriously considering moving, a foreign trade official from the Ministry of Commerce said.

The official, who declined to be named, said that "nearly one-third of Chinese manufacturers of textiles, garments, shoes and hats" are now working "under growing pressure" and have moved all, or part, of their production outside China in what he called the great industry transfer.

Favored destinations are usually members of the Association of Southeast Asian Nations, especially Vietnam, Indonesia and Malaysia.

And in all likelihood, "the trend will continue" with more traditional labor-intensive manufacturers transferring production, he told China Daily. ...

According to the Ministry of Human Resources and Social Security, from January to June the minimum wage was raised, on average, by 20 percent in 16 provinces.

The minimum wage in Shenzhen now stands at 1,500 yuan ($238) per month, setting the highest standard for the whole Chinese mainland.

Many developing countries in Southeast Asia have lower labor costs.

The monthly wage for manufacturing jobs in Vietnam was, on average, 600 yuan in 2011, equivalent to the level of 10 years ago in Dongguan, an industrial town in South China's Pearl River Delta....

...But lower costs in other countries could soon change, some said.

"The advantage (of labor and production costs) in Southeast Asian countries will only last for a few years," said Chen Jian, a general manager of a garment company headquartered in Foshan, on the Pearl River Delta.

"The trend is just like what happened some 10 years ago when many manufacturing industries in Hong Kong and Taiwan moved to the Pearl River Delta to chase cheap labor. But now you can see how much our labor costs have gone up."